Pakistan’s export cheaper as Real Effective Exchange Rate down 1.34%

Traders expect the rupee to weaken further in the upcoming week owing to a sharp decline in foreign exchange reserves brought on by fresh repayments of external debt, worrying the investors about how the country’s economic situation will develop.

“We expect the rupee to depreciate much further during the course of the upcoming week due to declining foreign exchange reserves and repayment of foreign loans. Any developments on the IMF [International Monetary Fund] front are being eagerly watched by the market,” a forex trader said.

The local currency closed at 226.94 against the greenback on Monday while it ended the week at 227.14 on Friday in the interbank market.

The country paid back $600 million to the Emirates NBD Bank and $420 million to the Dubai Islamic Bank, causing the State Bank of Pakistan’s (SBP) reserves to fall to a critically low level of $4.5 billion.

The coming week is turning out to be significant for Pakistan’s economy. Donors’ Conference is set to begin on January 9, which is led by the US in partnership with Pakistan to garner support for post-flood rehab, according to a weekly note from Tresmark.

“The IMF team is also due. If the differences between the government and the IMF targets can be bridged during this time, disbursement can quickly follow. It is still not confirmed whether the resumption requires ratification from the IMF Board,” the report said.

“The chief of army staff is visiting Saudi Arabia and the United Arab Emirates and no one is second guessing what this trip is about,” it added.

The delay in IMF funding of $1.1 billion has made Pakistan struggle to allay default fears.

Islamabad and the IMF differ over a review of policy and reforms the Fund is requiring in the country. The IMF’s programme review was supposed to be finished in November.

The IMF programme is connected to another essential foreign financing, making it difficult for the country to meet its external funding requirements. Up until June, they amounted to more than $30 billion and included imports, especially energy, and debt repayments.

The decline in the forex reserves put pressure on the rupee owing to the government’s slow progress in rolling over and securing foreign inflows from international lenders.

Given that elections are slated to take place this year, the government keeps delaying the IMF’s requirements out of concern for further political capital loss.

The local currency has lost 28.3%  of its value against the dollar in 2022.

Finance Minister Ishaq Dar has assured that the government would complete the IMF programme.

The story was filed by the News Desk. The Desk can be reached at


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